City Developments expects notable losses in H1

Measures to control the pandemic have adversely impacted the group’s hotel operations.

City Developments Limited (CDL) anticipates its net attributable profit after tax and minority interests (PATMI) as well as its pre-tax profit for H1 to experience significant losses, according to a filing. RevPAR is expected to decline by around 50-60%.

This is primarily due to the measures to control the pandemic, such as travel restrictions and mass cancellations or postponement of events, which have adversely impacted the group’s hotel operations segment, led by its wholly-owned subsidiary, Millennium & Copthorne Hotels Limited (M&C). The loss is expected despite the receipt of applicable government grants which mitigated the impact.

CDL expects the hotel operations segment to post a pre-tax loss in the range of $120m to $140m for H1 vis-à-vis a pre-tax profit of $76m in H1 2019, despite aggressive cost-containment measures in place. In addition, the property development segment is expected to register a decrease in revenue by about 10% as H1 contributions will primarily be derived from projects such as The Tapestry, Whistler Grand as well as Amber Park, compared with fully completed projects such as New Futura and Gramercy Park.

Meanwhile, the investment properties segment is also affected, taking into account over $30m of property tax and rental rebates given to tenants. Notably, there was a significant $197m pre-tax gain resulting from the closure of the Profit Participation Securities 2 (PPS 2) platform, following the sale of Manulife Centre, and 7 & 9 Tampines Grande in H1 2019, which further widens the comparative gap for this segment.

However, the projections has not taken into account the negative goodwill CDL expects to record from its 51.01% acquisition of Sincere Property Group in April. CDL is currently finalising the valuations of all the properties under the Sincere portfolio to assess the fair value, which will mitigate the decline in PATMI.

The group notes that the near-term outlook continues to remain highly challenging and uncertain until the pandemic situation abates together with the re-opening of international borders.

However, CDL notes that it continues to be in a robust financial position with sufficient liquidity to weather this crisis with its total cash and undrawn and committed credit facilities exceeding $5b.